Environmental value of land should be factored into taxes

The ecological value of land and its potential for offsetting climate change emissions should be considered for tax purposes, according to new advice to Scottish ministers.

The recommendation is among a number set out in a new report from the Scottish Land Commission (SLC), which has been tasked with identifying how changes to existing land and property taxation could support Scotland’s economic recovery and land reform objectives.

Other measures include offering incentives that would encourage derelict land in towns and cities to be used to buildnewhousingandoffering tax relief for landowners who rentoutfarmlandtoencourage active food production.

Theslcreportmakesthecase for ongoing reform to improve the way land is taxed north of the border.

A “vital first step” is the creation of a new publicly available cadastral map, showing the extent, value and ownership of land across Scotland.

The report identifies tax as a powerful way to deal with vacant and derelict land, proposing additional reliefs on non-domestic rates (NDRS) and council tax for new-build properties on long-term abandoned sites and giving councils new powers to apply NDRS on newly empty properties to discourage deterioration.

The SLC also addresses natural capital – the value of ecosystemservicessuchasabsorption of greenhouse gas emissions, crop pollination and flood prevention–andtheemergingcarbon market, to tackle climate change.

The report recommends particular attention should be given to how taxation can secure “a productive balance of public and private benefit from future carbon values”.

It also proposes specific consideration of Land and Buildings Transaction Tax, suggesting changes could increase diversityinlandownershipand address the risks to a just transitionofhighlandpricesassociated with carbon.

Offering income tax relief to encourage more letting of agricultural land is a final recommendation, but would require engagement on a UK basis to secure changes to what is a reserved power.

SLC chief executive Hamish Trench said: “Scotland has scope to tax land in ways that bettersupportthescottishgovernment’s policy priorities, but this needs to be considered in a careful way that acknowledgesthecomplexityanddevolved powers.”